How to Convert a Sole Proprietorship to an LLC in Michigan: Steps, EIN, and Timing

There is no form at LARA called “conversion.” That is the first thing to understand when you set out to convert a sole proprietorship to an LLC in Michigan. A sole proprietorship is not a legal entity — it’s just you, doing business. So you don’t transform it into anything. You form a brand-new limited liability company under the Michigan Limited Liability Company Act (MCL 450.4101 et seq.), then deliberately move your customers, contracts, accounts, licenses, and assets into it, and stop operating as yourself.

That distinction matters, because the paperwork is the easy part. Filing Articles of Organization takes twenty minutes and $50. The migration — bank accounts, EIN, client agreements, your Michigan sales tax registration, your insurance policy — is what actually determines whether the liability shield in MCL 450.4501 protects you or whether a court looks at your business and sees the same sole proprietorship with a new name on the invoices.

Here’s the full sequence, in the order that causes the least disruption.

Step 1: Check whether your current business name is actually available

Your sole proprietorship name — even one you registered as an assumed name with your county clerk — gives you no claim on the statewide LLC name register. Search the entity database through the MiBusiness Registry Portal before you do anything else.

Michigan requires your LLC name to be distinguishable from existing entities on record and to include “Limited Liability Company,” “L.L.C.,” or “LLC” (MCL 450.4204). Two practical consequences:

“Great Lakes Painting” might be taken even if nobody in your county uses it. If it is, you can form “Great Lakes Painting Services LLC” and then file a Certificate of Assumed Name so you can keep invoicing and advertising as the name your customers already know.
Your signage, trucks, and Google listing don’t have to change. The assumed name filing (currently $25, effective through December 31 of the fifth full year) lets the LLC legally do business under the old name.

If the name is clear and you’re not filing for a few weeks, you can reserve it — but for most owners, filing promptly is cheaper than reserving.

Step 2: File the Articles of Organization

This is the moment the LLC legally exists. File Form CSCL/CD-700 through the MiBusiness Registry Portal. The filing fee is $50. Online filings are typically processed in a few business days; if you have a closing, a lease signing, or a contract deadline, the optional $50 24-hour expedited service is usually worth it (LARA also offers faster same-day and two-hour tiers at higher fees).

You’ll need:

The LLC name with the required designator
A resident agent and a registered office — a real Michigan street address, not a P.O. box. You can serve as your own agent at your home or shop, but that address becomes public record and is where process servers show up.
Your signature as an organizer
Optionally, a delayed effective date (Michigan allows you to set the effective date up to 90 days after filing — see the timing section below, because this is the single most underused feature of the form)

Michigan does not require you to list members or managers in the Articles. That information lives in your operating agreement, which you should write even as a single member. An operating agreement is what tells a bank, a lender, a buyer, or a judge that the LLC is a real entity with its own governance — and it’s where you document the transfer of your sole proprietorship’s assets into the company.

Step 3: Get a new EIN — in almost every case

This is where owners get stuck, so let’s be precise.

The IRS’s rules on when a sole proprietor must obtain a new EIN focus on incorporating or taking on partners. Strictly speaking, a single-member LLC that remains a disregarded entity, has no employees, and owes no excise tax can sometimes continue using the owner’s existing number. In the real world, that’s a bad plan.

Get a fresh EIN in the LLC’s exact legal name if any of these apply — and for most people, at least one does:

You have or will have employees (payroll must be reported under the entity’s own EIN)
You want a business bank account (banks match the EIN to the entity name on the Articles)
You elect S-corporation tax treatment later
Clients issue you 1099s and you want them under the LLC
You use Stripe, PayPal, Shopify, or a marketplace that files 1099-K

Apply directly with the IRS at no cost, or use our EIN filing service if you’d rather not deal with the application and the responsible-party rules. Once the LLC has its number, send updated W-9s to every client and vendor — before January, if you can, so your 1099s arrive with the right name and number on them. Your old sole proprietor EIN isn’t “cancelled” (the IRS never reassigns an EIN), but you can write to the IRS to close the business account associated with it after your final filings.

Step 4: What transfers, what doesn’t

Item	Carries over automatically?	What you have to do
Business name (county DBA)	No	File a Certificate of Assumed Name for the LLC if you want to keep using it
EIN	Usually no	Apply for a new one in the LLC’s name
Bank account	No	Open a new account in the LLC’s name with the Articles + EIN letter
Client contracts	No	Assign them or re-paper them in the LLC’s name
Commercial lease	No	Most require landlord consent to assign; ask before you sign anything
Sales tax license / withholding	No	Re-register the LLC with the Michigan Department of Treasury
Business insurance	No	Have the carrier reissue with the LLC as named insured
Professional / trade license	Depends	Many Michigan licenses are tied to the individual; some require an entity license too
Vehicles, equipment, domain names	No	Transfer by bill of sale or title assignment, documented in writing
Past debts and past claims	Yes — to you	The LLC does not shield anything that happened before it existed

That last row is the one people miss. Forming an LLC in March does nothing about a job you botched in January. The shield is forward-looking.

Step 5: Re-paper contracts without annoying your clients

You don’t need to renegotiate everything. For ongoing client work, a short assignment and assumption agreement signed by you individually and by you on behalf of the LLC moves the contract over, and a one-paragraph notice tells the client what happened. For new work, simply issue the next agreement in the LLC’s name.

Three places to slow down:

Leases. Commercial leases almost always contain an anti-assignment clause. Transferring without consent can be a default. Ask the landlord first; most agree, though some will want your personal guarantee to continue.
Loans and lines of credit. Moving collateral into an LLC can trip a due-on-sale or default provision. Call the lender.
Real estate. If you own rental property personally, deeding it into an LLC raises Michigan transfer tax, property tax uncapping, title insurance, and mortgage issues that deserve their own analysis — start with our guide on putting Michigan rental property into an LLC before you record anything.

Personal guarantees you already signed stay personal. Forming an LLC doesn’t erase them.

Step 6: Redo your state registrations and licenses

The LLC is a new taxpayer to the State of Michigan. Register it with the Department of Treasury (Form 518 / Michigan Treasury Online) for whatever applies — sales tax, use tax, withholding — and close out the sole proprietorship registration so you stop receiving filing obligations for an entity that no longer trades. If you have employees, open a new Unemployment Insurance Agency account; your experience rating may transfer, so ask rather than assume.

Then work through industry licensing. A residential builder’s license, a cosmetology establishment license, a mobile food vendor permit, and USDOT/MC authority all have their own entity rules, and several of them are the reason owners discover mid-transition that the “new” business can’t invoice yet. Our trade-specific guides for contractors, food truck owners, and truckers walk through which credentials follow the person and which follow the entity.

Finally: update the business name on your insurance policy, your merchant processor, your Google Business Profile, your website footer, and your invoice template. If you’re changing the public-facing name at all, handle the Google Business Profile update early — map listings take time to re-verify.

The best time of year to convert

Michigan gives you one timing lever most states don’t advertise well: an LLC formed after September 30 is not required to file an annual statement on the February 15 immediately following. The $25 annual statement is due every February 15 thereafter.

That produces a genuinely useful comparison:

Filing window	First $25 annual statement due	Tax-year effect	Best for
January–September	February 15 of the next year	Mid-year split in your books	Owners who need the shield now — which is most of them
October 1–December 31	February 15 of the second following year	Short stub period before year-end	Owners who can wait a few weeks; you get extra months of entity existence on the same fee cadence
File in December with a January 1 delayed effective date	February 15 of the second following year	Perfectly clean tax year	Owners with employees, inventory, or an S-corp election planned

A few honest caveats. If you’re a single-member LLC taxed as a disregarded entity, the mid-year “split” is cosmetic — your income still lands on one Schedule C for the year. The timing argument gets real when you have payroll, a partner coming in (which makes it a partnership return), or an S-corp election, because then a January 1 start saves you from two sets of returns for one year.

And none of this beats the obvious rule: if you’re taking on risk now, form now. Waiting until October to save $25 while you’re framing a deck or hauling freight uninsured against personal liability is a bad trade.

What the whole switch costs

Item	Cost
Articles of Organization	$50
24-hour expedited processing (optional)	$50
Certificate of Assumed Name (optional)	$25
EIN from the IRS	Free
Annual statement, every February 15	$25
Resident agent service (optional)	Varies by provider
New business bank account	Usually free; some banks require a minimum balance

Run your own numbers — including the extras most people forget, like licenses and insurance — with our Michigan LLC cost calculator.

Mistakes that quietly undo the whole thing

Running revenue through your personal account “just until the new one opens.” Commingling is the single most common argument for piercing the veil. Open the account first, flip the switch once.
Invoicing under the old name with no assumed name on file. Either file the assumed name or put the full LLC name on every invoice and contract.
Signing as yourself. Sign “Jane Smith, Member, Smith Design LLC” — not “Jane Smith.”
Forgetting February 15. Miss enough annual statements and the LLC falls out of good standing, which is the worst possible moment to discover a gap in your shield. Here’s how the Michigan annual statement works, and we’ll file it for you each year through our annual statement service if you’d rather not track it.

Frequently Asked Questions

Do I have to dissolve my sole proprietorship? There’s nothing to dissolve — a sole proprietorship has no filing to cancel. What you should do is close your state tax registrations, let your county clerk’s assumed name certificate lapse (or withdraw it), and stop issuing invoices in your personal name.

Can I keep my business name when I convert? Yes, as long as the name is available statewide and you add an LLC designator to the legal name. If you want to keep marketing under the exact original name, file a Certificate of Assumed Name for the LLC with LARA.

Will converting change how I pay taxes? For a single-member LLC with no special election, no — you keep filing Schedule C and paying self-employment tax. An LLC is a legal structure, not a tax structure; S-corporation treatment is a separate election that only makes sense above a certain profit level.

Does my new LLC protect me from claims that arose when I was a sole proprietor? No. The liability shield applies to the LLC’s acts and obligations going forward. Debts, lawsuits, and unpaid taxes from your sole proprietor period stay with you personally.

How long does the whole switch take? The LARA filing is days (or 24 hours expedited); the EIN is same-day online. Realistically, budget two to four weeks to get the bank account open, insurance reissued, licenses updated, and contracts assigned.

If you’d rather not juggle the name search, the Articles, the resident agent address, and the EIN on your own, we handle the filing end-to-end — and our free 10-step Michigan startup checklist covers everything else on the list above. When you’re ready, start your Michigan LLC here.